september jobs report will show how much hurricanes hurt hiring. suggests this might be the calm before the storm. alan separatists looking blocked in. the political squeeze on catalonia titans. from new york city for our viewers worldwide, good morning and a warm welcome to bloomberg daybreak. i am jonathan ferro alongside david westin and alix steel. after eight days of gains and another record high at the close, futures go absolutely nowhere. in the fx market, more broadly the dollar strolling strength against the euro. the price action could be found in treasuries. 2.36% is your yield. alix: a lot of happening in spain. patient back -- cai should bank is down.

will they moved their headquarters from catalonia? you are seeing the selloff continue on the periphery debt, 2%.ish yields up about sterling, this is one for you, year.he worst of the can headlines get any worse for theresa may? jonathan: i think that is theresa may's cross. david: if they can get worse for her, it will. it is jobs day and coming up at 8:30 a.m. we will get september data from u.s. nonfarm payrolls and labor force participation rate. we will hear from the fed presidents. we first want to focus on the jobs numbers and turn to julie hyman in washington, d.c. she will get the numbers before we do and she will come tell us

at 8:30. what are you looking for? julie: what we have been looking at, the hurricanes will make this not a very normal jobs report. there will be a lot of what economists like to call noise in this report because of the various hurricanes. harvey made landfall august 25, irma september 10, and the survey period ended slightly after that. the nonfarm payrolls number, the median estimate of economists we surveyed is for a gain of 80,000 jobs, which is significantly lower than august. it would be a six month low, but there is a lot of confusion over exactly what effect the hurricanes will cause. there is an unusually high dispersion in the -- as well. 198,000 inspread of that nonfarm's payroll estimate, which as you can see from the

bottom chart, particularly in the past couple of years is pretty unusual to have that size of a spread. that said, the household survey, the actual jobless rate estimate, 4.4%. there appears to be more consensus around that, and we are looking for average hourly earnings to climb by three tents of 1% month over month -- 3/10 of 1% month over month. if we see a fax from the hurricanes it will be on the lower end of the spectrum, according to economists. it is probably not going to just last one month. we could see the effects happening for the next several months, both depression and rebound. alix: you want to pay attention to it that the you have to it 8:30? julie: yes, yes you do. alix: take a look at the bloomberg, this is the whisper number that people are putting on of what the number will be.

there is a steep decline in the last few days. meyer joined by michelle .nd of arturo gallo michelle, i get the uncertainty but we had some killer data this week. why the whisper numbers? michelle: that is a good question why the whisper number would go down. it could be as the consensus forecast came in the market kind of naturally slipped down. the dow was good, ism surveys were strong, durable good orders were strong. suggests maybe a low 2% number versus a one handle. alix: what is your number today? michelle: on top of consensus, 80,000. alix: how are you looking at the jobs number? we have to pay attention but we know it will be revised.

alberto: we think there is potential for upside surprises. focused on wage pressure after the positive numbers we have seen in ism over the past few weeks. , during theonths of summer, of bad inflation numbers but the dollar was weakening. we could see a rebound effect from that period of weak dollar into inflation, and the market wants to try to guess it from hourly earnings. that is key because the treasury market has been stable so far. it is failing to break this 2.36% level on the 10 year, but a tip higher in hourly earnings could make a difference. i want to establish where the market vices going into the number. trades on any positive surprises and says things are not that good, is that the approach we

are looking at? alberto: there is a goldilocks scenario where effectively you are living in a very long expansion into global synchronous growth expansion, so the bull case is that economic volatility, inflation, and policy volatility are low so therefore market volatility is justified to be low. if you look at politics, geopolitics, and some of the imbalances you are seeing across asset markets, you start seeing irrational behavior, companies that issue bonds for dividends to pay back stocks in the u.s. investment grade market. we are worried that if you see inflation, the goldilocks environment can be broken finally has the yield curve could be steeper, the dollar could get stronger, and a lot of the carry trades would unwind. this is one of the latent risks we face to go from a goalie goalie lockse --

to more inflationary environment. -- goldilocks to a more inflationary environment. lowering central banks the level of yields and volatility of yields and economic surprises. having said that, there is politics that is volatile and that is the first risk. military moves between the u.s. and north korea and populism in europe. you have seen catalonia, germany , corbyn in the u.k. the second risk is that you get some inflation his job markets have been tight for a while. it will not be a huge improvement in inflation, but you get a slightly hawkish fed they knew chair and a slightly higher inflation and bond markets, everyone is can-duration, bond markets keep the level they are now and we have a repricing. david: let's talk about

inflation, every month we talk about the average wage. is that likely to be affected by the hurricane? we know the number of jobs has a wide variation. is the same thing true for wages? thatlle: it is possible wages are distorted and if you do not see as much hiring than you do not have as much wage pressure on the upside, but you could make the case that certain types of labor related to construction and home building, wages increased. you want to look at an industry level breakdown of wages to help determine where there has been some noise or distortion, and this is the same that you want to do with headline numbers. try to determine on a breakdown where there is something that looks peculiar where you can gauge the underlying trend versus that noise. alix: does that mean that any kind of good number the market and go, see, it is great, any bad number we will ignore? michelle: if you get an upside

surprise to the headline number for wages, the market would be pretty excited, especially since we have seen a string of better data. if all else is equal, the numbers would have been biased lower so a strong number above consensus, even 150,000 which is comparable to last month, would be perceived as a positive surprise. michelle meyer and alberto gallo are sticking with us. we get reaction to the jobs data from alex cruiser of princeton university, rick rieder of blackrock, and gary cohn. we may ask about the fed. this is bloomberg. ♪

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jonathan: after a week of political drama that rattled financial markets, the spanish prime minister will convene his cabinet in madrid, set to meet with his ministers to discuss his options as the events threatened to spiral out of control. they have threatened to abandon the region. joining us from the region is maria taddeo. just get us up-to-date on where we are currently. maria: this cabinet meetings you mentioned has are ready taken place we are waiting for the press conference but we are getting a sense from the spokesperson with the government saying, this is your final warning, you have to drop this unilateral declaration now. there is no time to wait, no mediation. unless you drop it there is nothing to do. secondly -- and this is looking to the corporate world, a

document would allow catalonian's to move their headquarters away from catalonia. they would be allowed to fast-track if they have to. jonathan: it feels like the separatists have been boxed into a corner and it is difficult to understand how they get out of it. how do they get out of the position they put themselves in without agitating their base in catalonia? maria: exactly, that is why they are so under pressure. this is a story we brought yesterday. background,e bit of because i know this is difficult to understand when he do not follow it on a daily basis. this platform puts together upper-middle-class conservatives, and what brings them together is the idea of independence. the moderate side is getting concerned about the market reaction and they are saying maybe we can backtrack and step back. hours, maybe we could have a

talk in scale this back. the radicals are saying, we need to go ahead because we have the men mentum -- momentum. bute is a lot of division they have backed themselves into a corner because they have no domestic support and the e.u. will not get involved. david: he talked about the market reaction, what about business reaction? how bad could that be for catalonia? michelle: the business community -- maria: the business community is extremely concerned. bankers have put out this statement. they are already under pressure generating profits. now you get this element of uncertainty and they decided to move away from catalonia. this is a big bank based in barcelona. they operate in the rest of spain.

we expect an announcement later this afternoon. great to maria tadeo, catch up with you. still with us is alberto gallo of algebra's. you are running your fixed income fund. it is catalonian regional nominal debt at 3% and a 20 -- and a similar maturity spanish debt with an interest rate of 0%. i wonder which one you would be buying, spain or catalonia? the moment, i would not be buying any of the two. they are 0 -- both very tied by historical standards. there is a yield ramy them on premium on thed catalan bonds but we are close to the bubble.

what is interesting is the banks . they are talking about very solid banks, especially kind so u bank. xaca obviously there is some noise, but i do not think we are getting even close to a separation. in the worst-case scenario, you have a declaration of independence on monday, which by already triedans and then you have the central government tightening the screw on independence. our view of the solution is more fiscal autonomy for a region which is one of the richest in spain and is trying to keep tax revenues. the rest of the country does not see that in a very good light. catalonia is too large to become fiscally independent. it would subtract many resources from spain, and too small to be

independent from a military and economic resource basis. it is not big enough to be fully independent but too large for spain to let it go and become an independent region like the basque country. jonathan: have you been using this as an opportunity to buy spanish bank credit? alberto: there has some been does there has been some widening in the spreads of spanish banks. we think the banks in spain are really solid, banks like santander hardly have any loss during last decade, even the crisis. they are very diversified in global. the local ones are also relatively strong and profitable . we have seen the usual tail risk priced into the euro zone where something like this happens, that usually the market tends to over and best -- overestimate this risk. we think there is a small buy

opportunity and there could be for a few more days next week, but these banks are solid. alix: where else? all peripheries are selling off in terms of sovereigns, portugal, italy. where is this creating other opportunities? alberto: i think generally the periphery space has been a bit correlated again in the last few weeks. this year, europe has been a very positive surprise. everyone was bearish at the beginning of the year and then that le pen loss in france reversed the picture, creating a strong axis with merkel in germany. merkel will have to form a coalition despite the strong presence of the alternative for germany far right party, but we think that will happen. catalonia, we are talking about a negotiation, not a separation

in our view. fundamentally in europe there is growth. growth is coming to the countries that were weaker. greece and italy and portugal are growing. the credit cycle is turning, tanks are selling nonperforming loans, so there is a continued fundamental backdrop. even though we do not think macron be able to do everything that was said, we think there will be fiscal stimulus. also, european equities are still lagging and relatively cheap towards emerging markets or u.s. equities. david: alberto gallo is staying with us. coming up later, we will be joined by gary cohn, giving us the trump administration's take on the job numbers coming up. live from new york and washington, this is bloomberg. ♪

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this is bloomberg daybreak, i am emma chandra. glencore trumped china's bid to buy oil in southern africa. they agreed to pay $973 million to chevron's business enough -- africa. chevron agreed to sell assets to a chinese firm for $909 but $900 million. shares soared above the marketed range. switch designs, builds, and operates -- and has been profitable. the nobel peace prize was awarded to the -- the agreement was reached in july at the united nations. powersld's nine nuclear

joined in the talks. david: what i love about the story is that the correct -- executive director gets a call saying, you are getting the nobel prize, and she thought it was a prank. she did not believe it until she listened to the announcement. alix: that is amazing. david: president trump was anything but pacific last night at the white house when he entertained military leaders and their spouse is. -- spouses. >> you know what this represents? it may be the calm before the storm. joining us to understand where the president is pointing is kevin cirilli. what is he talking about? what is he directing this toward? kevin: no specifics from the white house on exactly what president trump meant, however a

lot of speculation about the iran deal because the president also saying he is looking to reportedly decertify the nuclear agreement and may congress act on this. that is where a lot of the feedback and fallout merged last night, democrats already criticizing the president on this front saying he is acting on a political whim and trying to fulfill campaign promises against national security interest. many within congress on the republican side are perhaps more in agreement. what specifically congress would do once the president kicks this their way mains to be seen, but this has definitely kick started an attempt -- a discussion on capitol hill. david: he just hates the deal. is there a timeline on when he will make a decision on whether to renege on it? we will likely get the official word next week that would kickstart a timetable of

about 60 days up in congress for them to have to get something done. we should note that he has begrudgingly had to acknowledge recently that iran has complied with the agreement. he still does not like the deal. david: thank you so much. news, a: breaking statement from the prime minister in the u.k. speaking to a broadcaster in britain. she says she has the full support of her cabinet. the u.k. prime minister says the country needs calm leadership and she has the full support of her cabinet. the reaction in the fx market, the cable rate, the pound a little stronger off the lows, down just 2/10 of 4% -- 1%. a marginal bounce, but throughout the week it has been dramatic. the worst week for the cable rate so far in 2017, so the message from the prime minister is that the country needs calm

leadership and she has support from her cabinet. alix: i feel like when you need to defend yourself on basic things like that, that is a problem. david: is the party going to say, step down? jonathan: i do not think that will happen. the cable rate down 2/10 of 1%. is said prime minister to have postponed her visit to china as well, so she has a lot of focus on. alix: she is calm about it. jonathan: she is providing calm leadership in the markets are not buying it. from new york, you are watching bloomberg. ♪ is this a phone?

or a little internet machine? it makes you wonder: shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data.

see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. jonathan: from new york, a straighn eighth straight game. futures pretty muted going in

payrolls just one hour away from the jobs number. the story in the bond market -- let's get to it. creeping a little bit higher, going up to that number by two basis points at 2.36. and the fx market, telestrate more broadly outside the fx euro , more specifically against sterling. week, the2% on the worst week for sterling so far in 2017. the prime minister says she has the full support of her cabinet. the market not really buying that at the moment. of slight bounce off the lows and still down the corridor of 1%. payroll is 60 minutes away and we will continue our countdown. let's get you headlines up to the business world. hears emma chandra. emma: president trump offered krupnik remarks -- cryptic remarks before dining with senior leaders. >> you know what this represents? it represents the calm before the storm. emma: and the president asked

what he meant, he replied, you will find out. the president is considering a new strategy to confront iran's nuclear ambitions. the president would leave a multinational agreement for now, but would ask congress to tighten the law over iran's compliance. he called the deal the worst deal ever, but allies say it is effective. tropical storm nate is taking aim at the gulf coast and may become a hurricane tomorrow. comingest track has a ashore anywhere from louisiana to florida panhandle. forced oil rigs in the gulf coast to shut down. global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries, i am emma chandra. this is bloomberg. david: we spent a good part of the week speculating who be the fed chair coming in february, but in the meantime, the senate approved the first ever vice-chairman of supervision.

randal quarles is front and center on that financial deregulation the president promised us. jamming us now is messy both lipid -- joining us now is matthew botsler. what do we expect them to do and how quickly do we expect them to move? matthew: a lot of the focus from randy quarles has been the supervision and that is the choppy is coming in for. it's not exactly how clear we can expect changes on that front. there's a definite number of proposals under consideration like relaxing regulations on community banks and potential look at the volcker rule again and doing a repeal of that. you start to get into some of the more international sort of agreements that are probably going to be thornier and take longer to figure out. the most interesting thing for a lot of fed watchers is what he will bring to the table in terms

of monetary policy and interest rates. what we know about randy quarles is that he's outspoken in favor of rules in the past. we will see if you can make any headway that with the committee. this committee seems predisposed toward one discretion as opposed to more systematic rule-based policy. david: i want to talk about jon taylor for a moment. there's a piece on the bloomberg today attributed to rick rieder from blackrock that says jon taylor would be the most disruptive chair. he seems to be an outside candidate come about the most disruptive because he is rules-based. according to his rules, the rates should be higher than they are right now. thehew: if you pull up taylor rule function, it has been interest rate at 3.25%, more than twice i as high as it is right now. you think that's kind of scary if you are a bond investor. at the same time, it's really important to remember that if jon taylor were to become fed

chair or if randy quarles comes in, they are going to face a lot of resistance from the current committee. it's not really a slam dunk or even a likelihood that they would be able to get interest potential even much faster than they are right now. while there is a lot of talk in and theof that possibility, the likelihood seems low given the institutional and economic realities of the situation. alix: to that point, we just showed taylor go and the taylor rule should be 3.5% and that would be a change for sure. i've been reading a lot that no matter who is the next fed chair that they will say some credibility issues and more dissent from the fed. their position and power will be eroded somewhat because of so many mixed views. do you think the same thing? matthew: it depends on who gets that slot. if you reappoint janet yellen,

that will not be an issue. jim powell will not be an issue because he's in the current full. gary cohn is a little bit of a wild card, but he is presumed to be dovish. it comes down to kevin warsh and john taylor where they would have that time that the need to establish credibility with the current committee in order to get them to swing more in their direction versus the current path they are on right now. jonathan: if we didn't simply input two things at the next fed chair might meet, low rate policy and deregulation effort and you went to the candidates one by one, you would say warsh deregulation yes, low rates maybe not. you take out the likes of gary cohn and say who knows? you go down to jerome powell and you say tick tick. out of the mall, based on policy in, thattside looking is the guy, isn't it? matthew: it comes back to the split between you have got for candidates and two of them are kind of unknown quantities

versus two that are known quantities. jerome paolo be one of the known qualities. he's a bush appointee and he is on board with the a path they are on right now and he has been leading the effort of financial markets with regulation with the fed. some of thepen to deregulatory efforts we were talking about earlier with randy quarles. deftly seems like a reasonable tech if the white house decides to go that way. it was reported that steve mnuchin, the treasury secretary, favors him as well. we will see how that goes. alix: matthew, thank you very much. here's of the markets reacting. up 33 basisds points and yields are around the highest since july. with us is michelle meyer and from london, alberto gala. a 33 basis point move does not feel like a howell fed. what you think is priced into the market? michelle: i think very little is

priced in and there's so much uncertainty as to who the candidates will be and even how to trade it. there's this discussion about discretion versus rules-based policy. it depends on the inputs for those rules. the rules are only good as the us options that you make with that. for someone who is rules-based, depends on their time horizon. it does that means they have to up to that rule, but it could be a gradual process towards the. there's still so much uncertainty as to where the context is going and what the candidates truly stand for. alix: if you feel there is a change in regime the matter what do you feel that there will be more volatility and that the fed will lose some of its weight? alberto: we definitely need some weight and some more leadership in the federal reserve going forward. think about why our central bank are so afraid of communicating

an exit? the economy is growing and there's unemployment at record lows. inflation is slowly growing. the problem we see as investors is that there is a window now to normalize policy. this window is not forever. it could last for a few years and then you could have a cyclical slowdown. theou get there, we found appropriate amount of buffer to lower interest rates again. in the qet stuck infinity environment where we just do another qe just a few years after trying to exit the first rounds. that is the real issue for investors and obviously can perpetuate those bubbles and make returns very negative for investors. jonathan: if yes the president of the united states whether this has been a successful administration through the first year, they will so yes. we will say show us and it was a stock markets are in a record high. gary cohn, asked in the same

question, and he will give you the same answer. why would they nominate a fed chair who would not be positive for equity markets? matthew: it goes back to the question of any fed chairs that would not be positive for equity markets and that's what we don't know. the two known quantities would be positive and the two unknown quantities would maybe positive too. jonathan: is that something you think about that ultimately they want someone positive for the financial markets? michelle: the checklist you laid out is spot on, which is the idea of deregulation and who would be the most supportive in that respect. in terms of the normalization process, who would be the most accommodative in support of financial conditions. that clearly is a concern. if it's somebody who is going to be really strict in terms of following rules-based policy and not reacting to incoming data and not be careful with their communication as we have seen with the current said, than that could be more problematic financial markets.

the big question is how will these candidates actually behave? it's one thing when you talk about the fed when you're not in the fed. when you are the chair and running things, maybe it's different. i think there's a lot of unknowns right now. david: i wonder if there's one other thing that should feel the checklist and that is the size of the balance sheet ultimately. we tend to think of this in terms of months or a year or two. the next fed chair will be there for a long time. there may be a very substantial difference of opinion of where that balance sheet should end up, which could make a real difference for equity markets and other markets. , we are at $20ly trillion in the major central banks balance sheets. this is a huge order of magnitude. we are talking about some central banks being as large as their gdp. in japan and switzerland, the central bank is close to the size of the economy. we need to have a normalization and policy rates because that helps banks to lend to the real

economy and also the balance sheet to leave some room for expansion if there's a next crisis. what happens during the crisis is that we had low interest rates from federal reserve and other central banks cutting rates. we had high regulation on banks, which was like putting the foot on the accelerator and pulling the hemp rate. likehelped large companies apple and amazon to fund at zero, but it cannot help the small businesses, which are the real economy and the wages for middle and low income classes. that is why you have high and the quality of the corporate level and in society. that we need now is high interest rates and some deregulation to angst to get liquidity flowing to the rest of the economy. ,avid: matthew and michelle thank you both very much for being with us. alberto in london will be staying with us. if you have to leave your television set, you can always go to radio.

tune in to tom keene and david gura on radio. you can hear them in new york, washington, d c, boston, and the bay area on sirius xm radio. this is bloomberg. ♪

emma: "bloomberg daybreak." this is "bloomberg daybreak." -- this is "bloomberg daybreak." i'm emma chandra in the enterprise agreement. greenroom. , alan krueger. this is bloomberg. jonathan: but the country needs right now is, leadership and that is what she is providing. she maintains the full support of her cabinet after a disastrous speech, which is

weighing on the british pound, on check for its worst week since october of last year. .till with us is alberto gallo you have been outspoken since june 24 what would happen to the united kingdom. june 24 of last year after the referendum. sterling and politics exclusively now and then we will fall the bank of a nonstory into the conversation. if the prime minister steps down, is that positive or negative for sterling? alberto: i think it starts a period of uncertainty. it depends on who the next prime minister would be. unfortunately we do not see a lot of candidates who would have an economic plan for the country. the economic plan, what i mean is to be more independent from europe, the kaye needs to change its business model. ithe growth model is based on exports. the u.k. is an island importing goods, capital of brings, and

exporting services. to europe mostly and it takes a very long time to rebalance exports to other parts of the world. there's also too much reliance on finance services in london and too much inequality between london and the rest of the country c. all these things are not tackled by any of the premise are candidates at the moment. jonathan: just ask you a follow-up to the monetary policy question, if that is the clinica political backdrop, what is the make everyone doing with a rate hike next month? alberto: what we have seen from isk carney and the boe being overly optimistic on a poor economic situation. roughly 10% of gdp is debt and this is just credit cards and unsecured debt on top of mortgages. consumers are weak and inflation is higher.

real wages have become lower and lower. and the of reflation new type of food in supermarkets becoming smaller or prices going up. it is happening and finally we are seeing as well in the last few weeks that retailers and also consumer credit companies are starting to get hit at the weakness. the bank of england's message has been everything is fine. other central banks are hiking and therefore we will have to do it as well. the market is taking this too seriously. i think they will do one interest rate hike at best, but they will have to stop from the heightened brexit uncertainty that we are starting to see. jonathan: if it they one done scenario, what does that mean for the gilt market when you have yields of 1.4% and sterling trading at 1.30? what's the knock on effect for one and done? alberto: the gilt market is one of the richest bond markets in the g10. the short part of the curve,

short maturities are priced around two or three heights probability. the curve has basically flattened with the short end going up, but the long end of the gilt market hasn't moved. going forward what we think is going to happen is that the curve will stephen because first the short end will reprise the donebility to be one and more than several hikes. second, the government will have to spent. d. the conservative party agenda has been one about balancing the budget. this is no longer possible. people are angry. they want homes and the don't have money to buy food. one third of children in the u.k. lives in poverty. one third of the land is owned by aristocrats. this is a very and balance country. theresa may has promised to raise minimal wages for nurses and firemen and other public jobs and to freeze tuition fees. there will be a lot more spending.

number three, the market will have to press the probability of new elections. in the case of new elections, there is a very high chance of labor winning. what corbyn means for the u.k. is nationalizations and more universalpotentially basic income, and a much higher debt to gdp level. jonathan: just a quick final question -- ahead of the referendum last year, a lot of people were concerned about foreign investors fleeing g ilt. they made out quite a large proportion of the gilt market. that hasn't happened. if the brexit story does not initiate that response, does the labour party government with a socialist prime minister force foreign investors to abandon sterling denominated assets? alberto: i think that is it possible scenario. let's remember that the world is overweight u.k. assets. reservesis 6% global

against 2% of bloomber global g. there's something around 80% of assets under management of the top 100 asset managers globally that is managed out of the u.s. or the u.k. and it. imports capital needs capital. it's very reliant on phon forein ownership of assets. if you have a labor government the nationalizes parts of sector like railways for example, you have credit downgrades and you have potential capital flight. this will be one of the possible endings. it is one of the possible d ofngs of this poor perio leadership under the tory party, which is only focusing on brexit without a clear strategy and not focusing on the real economic issues of the country. alix: alberto gallo, great stuff.

check out tv and you can watch is online. close on our charts and graphs and interact with us directly. go to tv on your terminal. this is bloomberg. ♪

alix: and equity markets, we are half hour away from the jobs market. a teeny bit of upside over in europe. you end up having a generally stronger dollar story on the day. gallo talks about the goldilocks economy and here's what he had to say. "what appears to be a goldilocks economy could be a low volatility trap, situation where excessive monetary stimulus keeps asset prices rising and volatility low across markets even though real economy risks arising." alberto is still with us. i love that quote from you because no doubt what we will be

talking about is the goldilocks economy. what are these real risks to the economy that you are seeing? alberto: i think there are three risks. one is that qe ends a little bit faster than you may think. central banks may become more hawkish and the second risk is political. you already see higher geopolitical risk across the u.s. and north korea, but also other fronts. iran for example with the south china sea and so on. there's a third risk that some plea positioning. investors are very long on low volatility assets and carry trades like emerging-market currencies. this positioning has been there for a very long time. they could just compound a potential selloff. it's not a base case scenario, but when you see volatility so low for so many years, you start

extrapolating and thinking it would be low even in the future. as investors, we need to be careful about avoiding those little bubbles that are growing and becoming more and more dangerous. saying manyou are people agree with, but the position for that before happens and how when the market seems to be ignoring it? the first thing to do is to try to find those assets that are unlocked by the market where investors are still applying a lot of tail risk. europe is one area where you can find assets that are still cheap. we had a widening in spain and italy for example. these are still unloved assets. the second thing is to avoid the bubbles and try to understand which assets are not just overvalued but also assets were people are being irrational. in a world where everything is overvalued, the definition of bubble has to change. you're looking at the most overvalued assets.

for example, u.s. tech stocks or some of the utilities and some of the emerging-market currencies. these are all assets that rely on a stable interest rate environment. number three is to tactically hedge against downturns. investors are still dancing. we are just very close to the exit door. jonathan: something i've heard before. you cannot drop cryptocurrency into the conversation with twice second left and i don't even get the follow-up question. alberto, great to catch up with you as always. ,oming up next, alan krueger princeton university professor of economics. coming up later, "bloomberg reall yield on" on this payrolls friday. ♪

♪ impaired oh whether payrolls fry way. -- a whether impaired payrolls

friday. trump's cryptic message at a photo shoot with military leaders. the president suggesting this might be the calm before the storm. catalonia separatists are looking foxtons. the spanish prime minister convinces cabinet. the political squeeze on catalonia titans. from new york city, county of down to the payrolls number, good morning. i'm jonathan ferro alongside david westin and alix steel as we count you down to the number. the scores are as follows. future softer by almost two points on the s&p 500. is in a straight day of gains and another record high to close and we head towards the fourth straight week of gains . the euro-dollar treading water over the next couple of hours. yields are climbing higher by about two basis points at 2.36 on the 10 year. alix: looking at the action over in spain and i'm watching the bank down by almost 2%. it's the worst performing stock on the ibex.

this reports of the board meeting that they can move headquarters out of catalonia. we are watching the headlines andy stock reaction. selling allg over in europe when it comes to the bond market, but spain is the underperformer. sterling having its wor worst week so far this year. theresa may says they have calm leadership and that's what they need. the market not really buying it and the gold flat ahead of jobs numbers. david: time after the morning brief. it is jobs day. coming up in less than 30 minutes, we will get september data for u.s. nonfarm's payroll, average hourly earnings, and labor force participation rate. we will hear from several members of the fed, starting with the atlanta fed president, followed by bill dudley, and then the dallas fed president. one of our key sources every jobs day is bloomberg intelligence. joining us now is carl riccadonna.

what should we be paying attention to when we get those numbers 28 minutes from now? carl: what we will have to focus on is not focusing too much on the data. there'll will be significant hurricane distortion. obviously in the payroll number, that could potentially knock payrolls off of the order of 100,000 or even more than that. mind you we had to severe periodnes during the when the survey was taking place. i think that could bump up 100,000 off of trent. my forecast is 60,000 for the number. i will also be cautious to watch for distortions in the length of the work week and hours worked and also in the average hourly earnings. that will be critical because so many economists are focused on looking for those wage pressures as the unemployment rate is grinding lower as we signal that we have arrived at full employment.

we may get the wage pressures today, but that is more related to overtime pay for utility workers and construction workers than any evidence of the labor market finally settling into below what neutral pace for the unemployment rate. hisare a numbers guy, but billing which going to be as important or more important? do you think there will be so me suggestion as to what is signal and what is most? -- what is noise? the bureau of labor statistics releasing a blurb saying that there will likely be a hurricane an impact, but they will not be able to quantify what that is. one will be the state-by-state employment data. we will have to wait until october 20 to get that. the second area is what we call the weather workers. job, butolks who had a were not able to work due to inclement weather. work reducedho

hours due to inclement weather. we look at these during blizzard , but it's also useful during hurricanes and other natural disasters to see to some degree the extent of impacts. jonathan: i had a question on the bloomberg from a viewer. he says ask that fool to find the stuff on the bluebird terminal. that.go to jonathan: for those who don't know, that is his boss. [laughter] joining us now is alan krueger. he is the former u.s. counselor of economic advisers chairman. let's begin with you -- a weather report or jobs report? alan: i think it will be a weather report. hurricanes in the past have had an impact.

jonathan: is there any aspect that we could find a little more reliable than the headline number? alan: i think labor force participation will be informative and may be more informative the most months even though it's somewhat noisy of a measure month-to-month. look at the people who said they had a job but couldn't work because of the weather. since that hurricanes were focused on texas and florida and georgia, it would be helpful if they could report to us like the rest of the country did. alix: so we get a number that is in line with what we are expecting. >> if we get a number that is gangbusters different and the likelihood that we will basically write it off due to hurricane is pretty high. alix: to the up and down side? >> to the up and down side.

if the numbers are in the range of 100,000 give or take relative to a be consensus, i think we just ignore the numbers. david: what about the average hourly wages? should this be affected by the hurricane or can we rely on those? alan: i think hourly wages will be informative. i think overtime probably not period in which we collected wage data. you can look at some sectors that are less sensitive to the weather. relative to the rest of the port wing -- report being less effective due to the hurricane, it's possible. david: do you expect it to come back up? it was 1/10 of a percent and have been running through 10th of a percent. expecting 2.5n wage growth to 3% as an annual rate. i suspect looking at the 12 month change.

we have been very slow to make that transition. i think the labor market is a little bit off compared to where it should be given how tight the job market is. i think they have more competitive advantages than they have had historically and part because they require more noncompete agreements by workers and there's no poaching agreements for example. i do think a tight labor market should be pushing us toward faster which risk it jonathan w: you wanted to weigh in? krishna: the market is looking to price either the december and 2018own or price data. i don't think you get much clarity on both fronts. if it's lower, you'll simply say the hurricane had a big impact and you will basically wait for the other data to support

assertions. jonathan: i find this argument a lot more new list given th that we do not know -- a lot more new newmont's given that we don't know who will be running the fed. how difficult is 2018? enough: it's difficult from an economic standpoint and you throw out the probability of it being a dramatically different fed and everything is up in the air. having said that, if the data was going to be significantly stronger than what we are expecting today, then we will start pressing out even if we think that there's going to be a change at the fed. the likelihood that there's a strong data and we end up with an even dovish fed down the road, i think that's not very likely in my mind. alix: that brings into the foreground what is going to be the number of jobs to keep the unemployment rate steady at 4.4%? where we at for that? alan: is a lot lower than it has been historically. probably close to 100,000.

maybe 80,000, but it's come down quite a bit given our demographics and slower population growth and the aging of the workforce and that 10,000 people a day are retiring. i think we are entering a new regime where we are going to see steady state slower job growth. it will move with the business cycle and month-to-month because it's noisy, but we are seeing that. if you look over the last nine months, job growth has been slower than it was over the previous year. alix: taking into account that job growth will slow, although we have been hearing that for a few years at this point, what is the bar for a fed hike in december? krishna: i think the bar for fed hiking in december is not data anymore. it's really question of whether the fed wants to tighten or not. alix: they clearly do. krishna: they clearly do and they have told you that already. the data would have to soften meaningfully and i do not think that is likely for them to not tighten in december. 2018 is a different volume. alix: no one knows 2018.

krishna and alan, both of you will be sticking with us. we have a great lineup of guests to react to the job report with bill gross, rick rieder, gary cohn. this is bloomberg. ♪

alix: it is a week of geopolitical risk. u.k., andain, the let's start with spain. the election watchdog has rejected the catalan vote. asis official for this is the prime minister reconvene his cabinet.

rodrigoe is . rodrigo: the parliament will not be allowed to meet. leaders saying they are moving forward and pushing ahead or are they lifting their feet a bit? it seems that they are having some second thoughts or at least part of the camp is having some second thoughts about the direction they're going. alix: thank you so much. jonathan: let's get the latest out of the united kingdom. let's head over to 10 ross at of our european headquarters in london. the prime minister saying she has the full support of her cabinet. does she? tim: she has made it clear she does not want to go anywhere despite the best effort of her own party. lawmakers think she should have resigned and should have a

leadership election. jonathan: where is the pressure coming from? tim: you can look back at the general election where theresa may call the general election and didn't need to and then lost her majority. i think a lot of people are unhappy about that inside her party. some former ministers this week speaking out in public saying she's got to go. jonathan: from the reporting you have been doing and from going down to westminster and speaking to members of parliament, is that the back benches that want theresa may out or please people close to her? tim: there's a debate about that. there are certainly some cabinet ministers who have the own ambitions. people must include boris johnson and david davis. they all staying publicly very loyal to theresa may. jonathan: until the next op-ed. tim ross, great to catch up with you. david: let's turn to washington where the president is surrounded by military leaders last night and talk about a storm coming.

we are joined by kevin cirilli. what storm is he talking about? i will give you my best political meteorologist report, but there's not many details. folks i spoke with last night and this morning say this is about the iran deal. i think what you will see over the next couple of weeks is finally a decision from this administration. the president likely going to force congress to take a look at this and decertify this iran nuclear deal. it will be interesting to see what course of action than congress takes. democrats want to keep this agreement, but republicans are somewhat split on this. we will have to watch the likes of senator john mccain and bob corker. david: we will be watching right along with you. jonathan: ronald reagan famously did this with hot mic and said dropped the bombs in five minutes. sometimes they are joking. alix: but it's so hard to know. jonathan: i get that. some, to have to take with a

grain of salt, don't you? david: no one's talking about bombing iran. we're talking about sanctions against iran. jonathan: i'll pick anyone is thinking about this morning, but we had richard nixon when he tried the madman theory and ronald reagan joked about the same kind of thing. maybe trump is playing the card. alan: i find it very difficult to understand the way the president operates. it's a must like he's trying to be a shock jock. day after day, trying to surprise us with some shocking comments. david: you're right about richard nixon and ronald reagan, but they did not play that card this often. this is less than a year into the in menstruation. jonathan: there's probably one man who listen to those comments and crunched a little bit and that's rex tillerson. what is rex tillerson thinking random? right now? david: there's a report about mike pompeo. jonathan: maybe that's the storm. alix: that has the wild rex rexerson -- to wild

tillerson because he takes his job very seriously. david: this is a career. krishna: it's a lot of fun for the news business, isn't it? the speculation around all these things. jonathan: i come in this morning and the most read story on the bloomberg was clients like yourself. it's the calm before the storm story. alan: yesterday it was puerto rico. alix: but at the end of the day, it feels like what is happening in the u.k. and spain is having a material impact on the market, but that's being ignored. krishna: when you have these types of situations when there's a new store that basically takes over -- or takes up the oxygen in the room, i think that is what everyone misses out on with things developing in europe and the global economy doing reasonably well. alix: when you have hedged political risk in the last year, you got burned. it didn't work out for you, right? how do you manage it now?

krishna: trying to call geopolitical risk is almost impossible for portfolio manager. therefore what you focus on is how much risk you want to take under the current environment as opposed to positioning your portfolio from hedging standpoint. spreads her tight and credit, the market valuations are high and equities. you have geopolitical issues but the outlook is decent. you position it for an upside bias, but you're not all in. that's how you deal with the situation. david: i really am reminded of the story of the boy who cried wolf so many times and find the wolf came in no one would believe him. the markets may be saying i heard this before and you're not going to react in that will come along and we won't be ready for it. krishna: that's always a possibility but i think you have to think about it more fundamentally. has there been significant excesses in the global economy since the financial crisis?

the point i would make is that investments have not got up much. maybe credit in certain parts of the world has grown a little better, but more than what we would have expected and perhaps liked but not to any level of excesses. the crying will store is really good and pertinent all the time. how much weight do you put on it today as a portfolio manager? not much in my view. jonathan: david touched on something important and to discussion we have had since the inauguration. when the white house used to speak, it would mean something and that typically means policy. now we don't know anymore. that's not just for domestic policy but foreign policy as well. you talk on the puerto rico issue. how difficult will it be for the administration to actually execute policy? never mind to understand what's happening when they go around doing the things they do. alan: there will come a time when they need credibility. you look at their past statements criticizing the bureau of labour statistics and

claiming they made up the data when nothing is changed -- that's going to hurt their credibility when they need it. they have been lucky so far in that we have been on a relatively smooth trajectory. the economy is basically bopping along at the same rate it was the past three years. at some point, we will face an economic crisis and they will need credibility. krishna: i think his point is a very good one. today if we had not started discounting anything coming out of the white house, we would have probably given more credibility to the likelihood of tax reform perhaps. the markets would have been higher. similarly when there is a slowdown and they really want to announce a policy initiative, nobody is going to believe it until we actually see it. that's a slight change of pace for this and attrition. -- and attrition. alix: both of your sticking with us 10 minutes away from the jobs report. s&p futures are flat. coming up on bloomberg television and radio, bill gross

will be joining us to give us his job market reaction. this is bloomberg. ♪

emma: this is "bloomberg daybreak." i'm emma chandra with your bloomberg business flash. glencore has trumped china's bid to buy an asset and seven africa. they agreed to pay number $73 million for three force of chevron's business in south africa and botswana. chevron had agreed to sell assets to a chinese firm for $900 million, but local investors exercised a preemptive right to take control the business and then agreed to sell to glencore. company's raised $531 million in the third biggest tech ipo of the year. they sold above the marketed range and began trading on the new york stock exchange. switch designs and builds and operates data centers and has been profitable for at least the past four years. oscar-winning movie mogul harvey

weinstein has taken a leave of productionm his company over sexual harassment allegations. according to "the new york times," harvey weinstein has reach at least eight settlements with actresses who say he had harassed them. ashley judd is one of them. jonathan: the jobs report six minutes away and they will be released very shortly. the numbers will drop right here on bloomberg. joining us now with the preview is brad bechtel. futures are that flat and the euro-dollar is that flat. treasury yields higher by two basis points. how do you trade a whether impaired number that will drop in a couple of minutes? brad: it will not be easy and there will be a lot of noise. traders will look through the headline number as just a bit of noise related to the hurricane. i'm going to focus on average hourly earnings. i think that will be key as an indicator for inflation and the pressure of the economy.

the underlying jobs data over the last several months has been very solid. employment in this country is very solid. economic data has been quite solid as well. we are sitting on a pretty firm background in the u.s. and i'm going to be focusing on average hourly earnings just to see how that inflation areas trucking along. jonathan: i don't think we can call it an estimate that a guess. was your estimate? on the average hourly earnings, we are in line with consensus of 0.3 and 2.5 on the year-over-year. very noisy on the headline and we will see what we get. jonathan: you guys are the low estimate in the bloomberg survey. for the people on the outside looking in, wise the wage growth number more reliable and this jobs report than the headline hiring number? why they both not whether impaired so the street? -- so to speak? alan: there will be a small

impact. what will drive the wage number is what happened to wage growth for people who were employed over the month. that is the bulk of the labor force. alix: when you take a look of the dollar, we have a relatively stronger dollar across the board. what happens if we do get a better number? how much more upside can we expect? brad: we have been on a nice steady ground for several weeks now and that coincided with the shift in fed these along with improvement on the trump approval ratings as well. i think we will continue to grind higher and it will take of big surprise to shake this market up. the market will look through some of the noise on the headline number. if we were to get some big extreme on the headline number , that would rattle the markets a little bit and cause a bit of selling into the weekend. i would imagine we continue to grind higher on the dollar given fed expectations and retrieve in particular.

every fed speaker has been telling more of a hawkish line. it seems like it is a must a done deal this point. david: how much of this speculation is on the leadership of the fed come february? brad: let's free much an open-ended question in terms of who will take the reins. we are all digesting what warsh and powell might do. in general, it is pretty much viewed as a status quo or hawkish fed president to come. either someone who's going to keep things as they are or maybe even a little more hawkish. both of those things to me are dollar positive. that will probably keep the dollar sort of grinding higher from here over the next couple months. david: how much is dollar driven as opposed to other side of the trade, for example the euro weakening itself? brad: absolutely. the euro and pound are both weakening on their own as well: steadily. that's definitely helping the

dollar. dollar-yen is rising and that's more reflection of what is happening with u.s. rates. if you look at the bloomberg dollar index for example, that is cruising right along. below 1150.out euro and sterling adeptly helping the cost -- are definitely helping the cause. jonathan: have we seen pete dollar weakness? krishna: will that be the case in 2018 is the real issue. for now because december is pretty much in the bag, the likelihood that you see meaningful weakness in the dollar is pretty small. having said that come i continue to believe that the likelihood that dollar strengthening meaningfully is pretty low. therefore the attraction of the emerging markets and emerging-market current season equities in that context is quite good. alix: just to wrap it all up for us in the next hour or so, which

currency pair is going to be most at risk? brad: probably dollar-yen. we are keeping an eye on that 113 area. we have been testing that a couple days now. we will keep it up on that. we did punch through 117 overnight, but there's a potential for another run at that level on the dollar bit. jonathan: brad with the low estimate here at bloomberg. from our survey, -45,000. gents, thanks for joining us. alan krueger and christian omani , the county down to the payrolls report that drops in about 35 seconds. futures are little bit softer down a temp of 1%. up three points of s&p 500. we closed yesterday at an all-time high on an eight-day winning streak. the story in the bond market is a little something with this. yields drop the morning continue to creep higher by two basis points. we trade now at 237. an fx market, the euro-dollar

going absolutely nowhere at 11712. the estimate for payrolls is a 80,000. the jobs report dropped right now. here's julie julie: a loss of 33,000 jobs during last month. the household survey, the jobless rate, kicking down to 4.2%, and average hourly earnings month over month climbing 0.5%, better than 0.3% estimated. year over rising 2.9%. we are looking at a difference in surveys, right? on the one hand, you have the payroll survey and the loss of 33,000, which reflects folks who did not get paid during the week. however, the household survey which reflects the jobless rate of 4.2% reflects people who had a job, even if they did not get paid during the week.

there were 1.5 million people did have a job but did not go to because the entire week of the hurricanes that we talked about. as part of that jobless rate, the number of unemployed persons 2 6.8 million.0, 331,000, to 6.8 million. the affect of the hurricane. in jobs --ases transportation and warehousing as well as health care. jonathan: that wage number and that unemployment number, and the participation rate -- they are the positives in this report. the wage number alone, it is clear what is happening. the two-year treasury yields spike a little bit higher, taking the dollar with it. euro-dollar rolls over. we are down by about a quarter of 1%. surprise on the

headline hiring number. how significant is it? >> i think that is the most significant number. it suggests, as julie mentioned, that there were a lot of people who had a job that were not able to get to work as a result of the hurricane. i think the job growth is probably fine. the 2.9% wage growth -- that is the headline. janet yellen has said in a healthy labor market, wage growth is between 1% and 3%, so there.just about chair yellen will say my understanding of the way the labor market operates is basically right. jonathan: very close to a three handle on the wage growth number. the estimate for payrolls was 80,000. the previous months are vice higher to 169,000. the bright spots in the payrolls report is the unemployment rate

dropping to 4.2%, and wage growth sparking much higher. 2.9%, year on year. here is tom keene and david gura, standing by with a special guest. tom: william gross joins us. he is with janice henderson, as we look at markets on the move. on television, jon ferro and the team have been doing the move. -- is it morning in america? bill: it is certainly beginning to be morning here in newport beach. the extent that your question in product -- implies wages are moving higher, and the average wage means people will want to spend more -- that is probably a positive. i know the wages revise higher in terms of the last month.

2.7% while, ym. i think that is good for american workers. tom: we revised up pre-hurricane. how did she on his henderson adapt and adjust to their hurricane distraction? bill: you basically try and throw it out for a month in terms of the employment numbers. we are negative in terms of the job growth. you throw that out. you look at the wages and you wonder whether or not that was affected by distortions. probably not as much. this is definitely a situation here at janice, with analysis of the fed, looking at the fed and the rate hike in december -- a lot of financial markets certainly are, as long as wages rise toward 3%.

they certainly are. i think the fed is slam dunk in terms of raising rates. tom: david westin showed me great charts on bloomberg of japanese yen. you have a weaker japanese yen. the idea here of a regime change -- bill gross, not what you are going to do on this friday morning in newport beach, but is there going to be a regime change with the janice unconstrained fund, the guys you are starting to get a little more lift and a little more wage growth? bill: i think unconstrained basically means that you are not constrained in terms of duration. people do other things as well. is beauty of unconstrained negative in terms of duration. you are making money off of higher rates as opposed to vice versa. that is what we have done over the past few weeks, certainly in ermany, and now in the u.s.

we're approaching critical levels. 240, 245 level -- a fromterm downtrend line the early 1980's, where interest rates have fallen by 20 basis points on average per year. percent.ere at 2.40 that means to me if the economy is strong, if the wages are in an up move, perhaps we could break the trend line and go above 240. for me, that is where we stopped. tom: this is critical, the idea of bill gross previously telling major, telling us rates could go up, but then a damper. let's take the word transitory over from yellen and inflation over to william gross. you have to run a bond portfolio. will these higher yields be transitory and lower for longer,

wherever that band may be? bill: i think we are lower for longer. that is what was said. described as a neutral real fed funds rate, supposedly now around zero, with inflation somewhere around 1.5 or so. but i think it won't be transitory. i think if in fact we move of -- i 240 instead of 260 set interest rates are falling by 20 basis points a year. year ago.ut a if we move above 2.40, i think there is a chance this long-term bull market in bonds is broken, and bond investors should be on the defensive as opposed to the offense of. tom: that is an exceptionally important statement you have heard from mr. gross. let's dive into that deeper. 2.384%.

with that important statement of a regime change with a 2.40 print, how do we adapt and adjust? let's start with the equity market. is the stock market linked into your 2.40% yield world? all linked.they are difficult questions and responses to those types of questions. we are ok in the stock market until we get to 3% on the 10 the 10 year.n i think we are inexorably linked on a shorter-term basis. it is not to say that five basis points on the 10 year will mean 100 negative on the dow, but those things are connected. it is all connected. we sent last night an article from the economist in terms of the overvaluation of all assets. to my thinking, it is true. low interest rates everywhere, negative in many parts of the inld, have distorted prices

terms of equity, commercial real estate, spreads, high yield bonds, etc. this is critically important on the 10 year to define other asset prices. if we move significantly higher, two hundred 60, investors have got to understand that the connection is a negative influence on their asset holdings. tom: one final question. i want to address this important statement from mr. gross on the 2.40%f a regime change of . when we do that, will we do that with stability, or will there be a lot more volatility in those old junk conditions? what is it going to be? bill: i think stability. not many people will believe me in terms of a long-term downtrend. termsill look at the near , the stochastics.

the fed will come in and try to talk markets down. i think it will be a gradual up move. if 2.40, of thinking, 2.40 five is broken, that is a significant sign that the long-term bull market is over. jonathan: that was tom keene with bill gross. if you missed the payroll numbers dropping 10 minutes ago, i will live through them. the print was -33 k. the story is wage growth. atr on year, it comes in 2.9%. a lot more to come on this program, including gary cohn, national economic council director, from the white house,

to react to those payroll numbers. ♪

emma: i and emma chandra. coming up in the next hour, black's global fixed income ceo. -- cio. this is bloomberg. moments ago, we got jobs numbers out. it was a standout if you get through the noise. nonfarm payrolls were down by 33,000, but you had august revised up. the big standout had to come in average hourly earnings, coming in at 2.9%.

we are the highest in years when it comes to labor force participation rates. those details a good story. the index moving higher. you might have seen the selloff in the bond market accelerating. 2.38 is how we trade. with us is alan krueger of printed university, and christian romani of oppenheimer. a focus on the wage number. if you dig deeper, utility raises were a huge responsibility, up 1.3% a year. are flat. they is the wage number a distortion? a little bit of the upside surprise on the wage number was an upside revision to the previous month, which david pointed out to me. it was not all a result of september. one could take out the effect of utilities. that could include some overtime or excess demand, given the hurricanes. the household survey is quite strong, if you look at topline employment growth.

that was over $900,000. looking at the establishment survey, restaurants got clobbered. the entire negative number was a result of eating and drinking places, restaurants and bars. in awas over 100,000 negative direction. it is clear the weather had an impact. one could dig deeper into the wage numbers and see how broad strength the wage growth has been over the last 12 months. alix: fair point. christian: the key point is, the other data points we have gotten over the last few weeks have been reasonably strong. i think this confirms the story that has been permeating in the market, which is the data is strong. the fed has said they are going to tighten. september -- december is in the back. i do not think the numbers were strong enough for us to say they are going to tighten in 2018 and tighten three times, as they have stated, and we still have to factor that in.

no regime change. definitely a strong number. alix: the trade today is buy dollar, sell treasuries. when does the 2018 question come to the forefront? krishna: the strength of the dollar is probably going to be with us for some time, because the underlying data is reasonably slow. i think the dollar alone brings down the probability of a tightening in 2018, as opposed to a probability of increasing the probability of tightening in 2018. the strength of the dollar would have negative consequences for the u.s. economy. i certainly understand the effect of the dollar, but people are saying repeatedly, we don't see wage pressure. wagee starting to see growth. if that happens -- jonathan: a significant -- david: the magic number jonathan:.

basis point calculation. alix: [laughter] david: if that number were to hold up, why doesn't that tip the number toward the fed as opposed to the market? krishna: the key is what you just said -- if that number holds up. if the data is persistent at these levels, and we go through a couple of quarters, rates are going to be meaningfully higher. the dollar is going to be stronger. maybe they are looking at it in 2019, going down as a result of that. the key is, it has to persist. the reason markets don't believe in it is because it has never persisted before. how much lower kanaan employment go, at 4.2%? alan: we have seen it yet below t below 4%. it got to 3.9% at the end of the

90's. we could see something in that territory again, assuming we do not have external or internal shocks that will derail the recovery. when you look at the wage numbers, every month is not a straight line, but it has been edging up, in spite of the fact that the fed has stopped accommodating the economy as much as it has been. i can't imagine, if we are on a path where unemployment continues edging down, that wage growth does break the 3% barrier by the end of the year, and continue to edge up into next year, in spite of the interest rate increases we have seen. the fed has done a pretty good job managing the economy. we are a little below the inflation target. unemployment is heading toward historical lows, and we are seeing wage growth. they are managing pretty well. alix: thank you for being with

us. allen, you are sticking with us. we have breaking news. i swear this is true this time. sprint and t-mobile supposedly are putting the finishing touches on a merger that could be announced at the end of october. they are both conducting their final due diligence to decide how they are going to deal with sprint's valuation. stocks are unchanged on the news. this has been the rumor for years. nonetheless, our reporting shows they are close. david: didn't they already do that? alix: right? thethan: let's go back to payrolls report that dropped 20 minutes ago. down, 33 k. was the wage growth number coming in higher. here on year, i am told it is really close to three. the estimate, 2.6. ,oming up, rick rieder

blackrock fixed income cio. after that, gary cohn will be joining us from the white house to react to those payrolls numbers, in about 40 minutes time. do not miss those conversations.

david: this is bloomberg. still with us is alan krueger of princeton university. you have spent a lot of time studying labor force participation rates. i want to put up a chart illustrating the difference between discipline rates based on education levels. we have seen a decline in participation, sort of flattening out a bit. why is labor force participation going down? there are many answers to that question.

the main reason is, labor force participation has declined for those who have a low level of skills. you see that in the data we have. that has particularly been the case for men. that has been going on for men for the last decades, for several decades. i think it is related to shifts we have seen in the economy, the decline for workers with lower skills. the other major recent labor forceis that participation stopped rising for women and started to decline since the end of the recession. the small recovery we have seen and labor force participation has been driven by prime age women coming back to the labor force. that can continue, but the recovery goes along. i do not think we can go back to more generations of women go to work. we need to look differently at

how we raise labor force participation. i think education is extremely important, not just k-12 and college. it is a matter of preschool, continuing education for older workers. i think there is a lot of consensus to do that, finding the politics to get that done is hard, but there is a lot of consensus. another easy answer is immigration. the senate bill will raise labor force participation, economic growth, and reduce the deficit. that is another way of increasing labor force participation. politically, that is difficult. intuitively, people say, if we bring more people in the country, they will take my job. while jeopardy suppression rates go up? , to theen immigrants u.s., they also bring demand -- americantaurants, buy

products. immigrants are also extreme the entrepreneurial. you look at companies -- how immigrantstarted by question mark it is a win-win, when it comes to the economy. david: you have talked about a situation contribute in, particularly with men, to a decline in workforce participation. alan: we have had an old we are -- opioid epidemic in the u.s., the u.s. is 5% of the world's population and we consume 80% of the opioid medication. the problem ofto labor force participation. i found that almost half of the prime working age men who are out of the labor force are taking pain medication every day. and i look across regions of the country, the regions which have seen the biggest growth in prescription medication have seen the biggest declines in labor force participation. that looks like it is separate from problems we have had in the rust belt.

it is affecting other regions of the country as well. not think it is the only important factor, but it is an important factor and seems to account for about 20% of the decline in labor force for to station of prime age men over the last 14 years. david: thank you for being with us. jonathan: coming up next, we count you down to the opening bell. rick rieder will be joining us. after that, do not miss this conversation. terry cohen, the national economic council director, -- gary cohn, the national economic council director, will talk with us from the white house. ♪

impaired: a weather-

jobs report as wage growth surges. trump cryptic at a press conference with military leaders, suggesting this might be the calm before the storm. catalan separatists are looking boxed in. spanish prime minister mariano politics titans. we can't you down to the opening bell. i am jonathan ferro alongside david westin and alix steel. futures are softer after an eight day winning streak and a record high at the close. the longest winning streak since 2013, looking a little bit negative. strength post jobs story starts to erode over the last 30 minutes or so. 1.1693.lar back to treasury yields higher. a continues on the screen right

now. a lot to get through. let's begin by getting into movers ahead of the open. alix: here is a micro look. 4%.o off by fourth-quarter earnings did beat estimates. cops sales pretty strong, coming in over 6%. the worry spot was e-commerce. amazon is going to be in the mix as well. ofstion marks for the future cosco. journal, thethe family is set to involve a new buyout structure. the family did have trouble raising financing. unclear were extra equity is going to come from. t-mobile goes nowhere premarket. bloomberg news that when the skies report earnings at the end of october, they will announce a

deal. currently, they are trying to th -- dot their i's and cross their t's. u.s. actually lost jobs last month for the first time since 2010. the reflected major disruptions from hurricanes harvey and irma. a 16obless rate fell to year low, while wage gains accelerated more than people had expected. julie hyman is reporting from washington, d.c. you had a chance to dig into these numbers. which industries were the winners and which were losers? were: the losers really the food services and drinking places, which lost 105,000 payroll last month. these were places shot by hurricanes. hurricane harvey hit august 25. irma hit september 10. a week the survey was done was

the week of september 12. these are folks who were presumably still staying home because of the aftermath of hurricanes. to be very clear for the folks at home, there are two surveys that make up the jobs report. you have the household survey and the payroll survey. survey is people who had a job even if they did not work or get paid in a particular week. there were 1.5 million people who had a job but did not work the entire week, so they did not get paid. you saw that take down in the jobless rate. an persons falling by 331,000. also saw a drop in the payrolls report. there are increases in transportation and warehousing, up 22,000, and health care, up 23,000.

construction seems to have perhaps been affected by the hurricane. if it was, it is interesting there were still games. -- gains. alix: thanks so much. we are joined by rick rieder of blackrock, fixed income chief investment officer. i am a traitor. . am going to short treasuries is that right? think people are going to interpret the fed can move. they are going to go in december. do i think equities are still going to -- do we think equities will still go higher? i do. the rates market, we have said we think the 10 year is going to 270 five this year. i think people are misinterpreting. i have a chart. i do not know if i can show it. i think you throw out some of this top line.

you saw the same thing with katrina. data israel. say there is no wage inflation taking place. if you strip out -- if you look shows, the wage tracker if you take median wage growth, and has been about 4.2%. this is confirmation we are getting real wage growth. this is pretty interesting. is the stability of the wage data over time. fact, the 12 of month average is up. unbelievably consistent, versus anything you have seen and history. the reason the markets are reacting -- you would think rates would start to rally. people are rightly assuming, don't worry about this. i do not know if there is a katrina chart --

alix: you don't need us. we are going to take a coffee break. you can take it through to gary cohn. rick: the exact same thing happened, and a lot of economists forecast this number. that is the diff you saw in katrina. we are going to get it back next month or the month after. markets are rightly assuming, do not worry about -33,000. alix: the rates, we bring up mipr, the probability of rate hikes. this is today versus yesterday. the green line is today. the yellow line is yesterday. we have seen a quick rewriting in the last 24 hours. a move of seven basis points. there is a couple things to factor in. you have a dynamic today where -- thisis laid out

year, the fed has done a brilliant job of communicating with their trajectory is going to be. the front end of the curve can follow the fed very closely. the backend, particularly if you get wage acceleration -- we talk a lot about technologies keeping inflation down. at the margin, it is accelerating a bit. the front end of the curve could have pressure on it. does the curve flattened a tremendous amount over the last couple of years. we could see more pressure from here. alix: the naysayers are going to say the wage inflation is messy. you end up with utility seeing big wage gains because they had to be enticed to work after the hurricane. maybe it is not sustainable. look atthink when you wages, something important is happening. the change in commerce in this country is extraordinary. if you take were wage gains are

in the last couple of years, it is things like construction. they cannot find humans to work. professional business services, you are seeing real wages in things like retail -- when you look at the median wage in this country, it is somewhere between 4%..5% to we think average hourly earnings will trend higher as well. when youthe data, strip apart, look at where it is coming -- it is not because of technology. it is not going to be as robust as we saw years ago. but it is real. jonathan: speaking to you guys at black rock again and again, you do not think there is a mystery there at all. rick: there is a technology influence that is extraordinary. you look at every cpi report. you look at apparel. you look at food.

transportation services, wireless services -- you have this extraordinary inflation coming from technology, and two pointre inflating 5%, 3%. education, health care -- we do not have the technology. it is goods that are deflating. every cpi report bears that out. it will be interesting. -- we're i was making never going to see inflation like we saw 20 years ago. you guys at black rock may be right. it is the correct way to think about inflation. you express that as a market view without losing money? i think there is something really important about fixed income. there are parts of the world were inflation is coming down significantly. ratess where they can cut

-- you look at brazil, argentina, rate cuts. it is the emerging world were inflation is coming down. real rates are high. the developed world is a next her to marry to come -- extraordinary economy. the rates are low, particularly in places like japan and europe. you will see that convergence. where do you own your interest rate exposure? real rates are already high. developed markets, they are going to move slowly, but higher. david: we have a question from a viewer, who says given we had a 105 thousand drop in low-paying restaurant jobs, is it possible inflation in wages is in part because we dropped out lower paying people? that is a fair assessment in terms of one month, and it is the converse of what i just described. 17 million people,

roughly, since 2010. a vast majority in lower rates jobs. when you take the average wage, it gets down. but the true story when you look at it over time is, we are getting some wage acceleration. against the way the job market works. not going to get out of control. wages are not going to get out of control any time soon. jonathan: we are going to count you down to the opening bell. shortly after that, gary cohn, national economic council director, will join us from the white house to react to the payroll report. stay tuned. ♪

jonathan: the latest out of spain, the spanish economy minister speaking in madrid saying the catalan government is creating anxiety for government and he supports anything that boosts prosperity. this after a week of political drama as spanish prime minister rajoy convenes his cabinet in madrid. we have had the first concrete apology from the spanish government for the clashes we saw over the weekend. the central government's representative in catalonia spoke exclusively to bloomberg. we are profoundly sorry because this was not our wish. we did not want a single person getting hurt. we need to remind ourselves that the regional government in catalonia should have explained to them they were participating in an act deemed illegal by the court, and there was an order from a judge asking police to remove the material. jonathan: maria, what is the

latest? maria: it has taken almost five got thet we finally apology. the spanish government got a lot of heat from the european union for the violence we saw on sunday. , the centralsaying government is sorry this happened and people got hurt, but again reminding us that this situation is happening because the regional administration has gone completely rogue. they are not paying attention to the law. they could prevent a lot of this abnormal situation if they were to return back to normal constitutional order. the central government calling on the regional catalan government -- stop this now and get back to the legal order. jonathan: in terms of the business movement, memories of quebec, and businesses starting to relocate and think about where to place their headquarters. the spanish banks are headquartered in catalonia.

banks are based here, but a lot of their business is in spain. crucially, this is a message they want to send to the market -- that no matter what happens, no matter the political order, they will be backed up by the european and will be part of the eurozone. banko sabah tell -- sabatell announced they are moving away from catalonia. -- minister said they will make it easier for companies to move away if they want to. jonathan: we will catch up throughout the day. we are joined by the bloomberg intelligence chief u.s. strategist, and rick rieder of blackrock. i am going to take you to the ecb hq, the very top floor, mario draghi's office. what the you think he is

thinking about the politics in europe? feel like i can get closer to the thought because i was there wednesday. i think there are a few things that are important. you are seeing growth, industrial orders numbers, which are impressive to say the least. you are seeing significantly better economic data and better on implement numbers. i think there is something really critical that central bankers are looking at around the world. financial conditions are extremely easy, relative to what is happening in terms of growth in the world. one of the things mr. draghi is thinking about is, how do i balance the taper program? i think he has a window to do it. the data is solid. you have to factor in an italian situation. we bought a bit of spain yesterday in trade. we do think that ultimately you are not going to see -- where were you on the

spanish curve? rick: the 10 year space. the market was up and we traded around that. we think there are still going to be more headlines. we think ultimately you are going to get to a resolution where you are not going to see independence take place. back of mr. in the draghi's mind. he has a lot of things working for him. i think he is going to keep moving. does the same answer apply to an investor? fine.hing is as investors, you focus on the growth you are seeing. really did not pay too much attention to the politics. worldwide, we have been captivated by political situations all year, and the equity markets are trading on fundamentals and a little bit of technicals. 'se thing i would add to rick

comments is, mario draghi is probably thinking about currency right now. he is being given the gift of the euro relieving some big earningsevident in the season for european companies. the european equity market has been stagnant all summer. that is a reflection of poor earnings growth relative to expectations and the currency problem, which really is starting to impact company earnings results. probably celebrating a near-term recovery in economic growth and that probably gives leeway, wee bit of want to watch the numbers pretty carefully. the earnings we saw has proven to be a pretty good drag on corporate america or corporate europe. with that continue into the second half of this year and next year is the big question mark. m -- is: this chart is versus the spanish. a decent spread in there.

would you go there, or is there too much risk? rick: of course there is scaling on all these things. we would go there. one of the things is spent -- is, spain has backed up relative to things like cyprus. you think about how you scale it. how much to buy -- away from , spanish growth or employment data is ultimately the best in europe. now, you have a window that probably you could buy a bit cheaper. rick and gina will both be staying with us, and in a few minutes, we will be joined by gary cohn, from the white house, with the administration take on jobs numbers. live from new york and washington, this is bloomberg. ♪

alix: one sector to watch is corporate credit. investment grade bonds yielding 90 basis points over treasuries, the most narrow spread, almost, since 2007. in 2017, we are close. rick, what do you do with corporate credit right now? rick: we have reduced a bit. the levels are tight. here is a conundrum. yield in need to get the world. the condition around credit is still pretty good. the maturity wall has been pushed out. do you own? we think spreads are tight. we have reduced high yield we have seen more of that recently. we still have allocation.

there are other areas like em that we like the allocation a bit better. -- we talkzed assets about real rates in emerging markets. i said --osure, like you are not going to see a default cycle or a shock to credit, at all. alix: where on the quality scale? rick: do we hold? we have reduced pretty much across the quality cycle. we tend to be single-a, triple b. in high-yield, double b's are not that exciting. some of the double b's inside of 4%, should not be called high-yield anymore. we do not find that interesting at all, these spreads, given the ecb is the biggest buyer and have a different risk/reward paradigm than we do.

we have bought banks in europe. the ecb is not buying. that is where we think there is real value. alix: we have seen a lot of issuance in the high-yield energy market. the blue line is oil price. energyte line is the index. the last time we saw yields this low for energy was when oil prices were $80. now, that is not the case and probably will never be again. issuanceeeing a lot of in high-yield or investment grade. is there a point where that changes or the market gets skittish? rick: that is a good question. what happened last year -- we had the tremendous oil shock in the credit markets. you cleaned out a lot of the weaker systems. the dynamic of energy -- that is part of why it holds up better. we like having that allocation of energy. we think oil is going to be relatively stable for the time being. oftentimes, we will negotiate a deal. people do not care about

covenants now. you get frustrated. alix: if you do, cannot touch you. rick: the covenants, the response is, other people will take five basis points. that is the environment. the demand for yield is overwhelming everything. that is why central banks need to push it back on little bit. financial conditions are too easy. rick rieder, looking happier and happier as the week goes by. both of you sticking with us. coming up, gary cohn will be joining us from the white house to react to the payrolls report. the opening bell just around the corner. futures negative. ♪

so we need tablets installed... with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. >> with 27 seconds away from the aen in new york, heading to fourth straight week of gains after an eighth straight daily advance, the longest in 2013.

softer ona little bit the s&p 500. another record high close for thursday coming into friday. a little bit of weakness at the open. yields higher. the wage growth story is what we trade on. much better than anticipated. where yields go typically the dollar goes with it. the dollar index up 2/10 of 1%. we reclaim a handle on the dollar index. something that cannot catch is crude. 30 seconds in, let's get you the open. littleigging a deeper, there are some micro-stories. .ne comes from costco

danone sales. pharmacy stocks getting hit as well. enteringuld be the pharmacy market, not if but when. >> they are just out an hour ago can we go to the white house where we are joined by david cohn. we have been reporting on these numbers. we have the problems with the hurricane that affected the overall number of jobs. you have strong numbers on wage growth. 2.9% annualized. at theook at these larger perspective. has there ever been the case we have had a massive tax-cut with this employment situation, that will involve deficit spending? >> thanks for having me. i appreciate the opportunity to be here.

we are excited about the numbers. there is some noise because of the hurricane. you discount that noise and you're looking through the numbers at the wage growth and unemployment, which is the bright news. i think what numbers are showing you, president trump's economic agenda and what he has committed to in the white house. we believe the tax cut is essential to continue the economic growth we have started. have been rolling back regulations that we need to continue the economic growth here in america. >> do you have reason to believe it will not continue? in history, we have always had deficit spending and tax cut's in fallow times. right now we have a robust time. we is the president saying don't really need to intervene?

not on thetill sustainable level of growth that we should be an want to be in the united states. we have been averaging 2% growth. the president is not happy with 10% growth. he ran on a progrowth platform. tax reform is necessary. we need to allow american companies to compete on a level playing field. our taxes do not allow american companies and businesses to compete on a level playing field. our corporate tax structure and business tax structure is too high today. alix: no one we talked to things he will see 2.9% growth sustainable. 're arguing for a tax cut. alix: no, with a tax cut. no one says they will sustain that either way. >> we completely disagree with that. kevin camey think,

out and talked about the economic growth we believe we will have by cutting business taxes and attracting business back to america, growing opportunities for employees, creating more wage growth in the united states and keeping a sustainable system we are at now. we believe we can have 3% growth with taxes and regulations reform that we are after now. alix: i want to get your take on a trump tweet. he says the stock market hit an all-time high. in 16 years.lows the highest level in decades. do you really want a white house that is associated with record highs when you know how precarious that can be? >> president is committed to

economic growth. he is committed to a progrowth approach of a agenda. the stock market is. the fact that we are having real impact. alix: so you are tying your success to what the stock market does? >> we're tying our success to jobs, job creation for better opportunities for american citizens. the stock market happens to represent that. you and i both know how the stock market is priced. priced on expectations of future earnings. future earnings are representative of what they think is this is are going to be able to accomplish in the future. david: if it is about the chair, aree next fed you sensitive to the way markets would take the next fed chair and who it might be? alix: we are sensitive to

everything. we are sensitive to all of the policies. the president thinks about economic growth and middle-class ,mericans every day hard-working americans every day. and how he can put them in a better position economically and help improve their life. that is what the president thinks about. david: i want to know what you think about it. are you sensitive to how the markets may interpret that individual and their policies? >> we think holistic about everything. we are not myopic. we in the white house have to think about the topics together. that is our job to think holistic league. david: let's think holistically about this. do you think the next fed chair requires a phd in economics to garner the respect of those on the fomc? talk aboutgoing to the specifics of a search going on now. >> can i come back to your tax

plan. you are going to get to 3% sustained growth. could you explain what the next tax plan will generate. growth comes from two sources, more people working, demographics and productivity. what will those taxes, if you get your plan am a how will it generate more people working more increased productivity? >> we could not agree with you more. when you lower the business tax rate on the pass-through entities, we make ourselves more competitive. we make it so businesses want to locate in the united states. when they locate in the united states they have to hire labor. they compete for labor. they hire people. we see wages increase because we hire people. we will see productivity in these numbers because as we build new manufacturing a lot of us -- a lot of it is going to be

productivity driven. it is when to grow by leaps and bounds because we are a technologically driven economy. we think we can increase productivity dramatically creating a tax code that allows businesses to compete in the united states with other countries around the world. >> one last question. 4.2% unemployment, where are the workers going to come from? >> we can increase the participation rate. those excited to see numbers. we believe there are more workers willing to come into the you workforce. >> thank you. good to have you. jonathan: he did not give much away. >> he says as he sthe question s the right time to be implementing fiscal policy?

we have been in an unusual time. it is open on the back of the central banks. is now the perfect time? probably not. if you do things like reform, the tax code is too complex, there are some things to be done. ithink you have to look at in the whole suite of things. >> let's be clear. broadening the base, that means taking away deductions. deductionsthey float they get blowback. we are going to get state and local taxes. republicans are backing off of it. how realistic is to expect we are going to get that broadening of the base? rick: i think it is hard. larry said it is hard. you have a big deficit. this creates a significant number. if you don't do things like eliminate state and local, how do you bridge that gap?

are you going to get something done? i think you're going to get something done in terms of a corporate tax rate. you have forces in terms of how do we close that deficit gap? we have to take away some of the deductions. that is a tricky one. will it close them? it won't nearly be as profound as anybody would like. >> great to have you with us. an eight-day winning streak. we snap that. will we snap that at the close as well? highs, back for all-time down 21 points. this is bloomberg. ♪

>> this is bloomberg daybreak. the former chief economic advisor to ronald reagan reacts to the tuesday jobs report. alix: netflix announced it was increasing its price of its most popular service plan to $11. they are trying to pay for its movies. he hasn't underperformed rating on netflix. make the move? they are saying they no longer have the growth we saw in the u.s.? michael: i think that you can look at this two ways. one is that they are supremely

confident that they will continue to grow in the u.s.. i think that that is probably true. the other side is their content costs are escalating rapidly. free cash flows turn more negative each year. as much as $900 million. they need to raise prices just to keep up with contemplating rising costs. i think you get 102% attrition. the valuensumers love proposition. i don't expect many people to quit. i think you might see slowing growth because they are subscriber additions are going to be competitive with amazon and hulu. we will see what happens next year. the stock works through year-end. next year subscriber growth slows. investors are going to figure

out that. are these them raising prices? >> as soon as the story hit people in mail me because i have an inflation fetish. given this calculated inflation they could say all the current movies are better than the old ones. once we adjust for the improved content the prices have gone down. >> are there a lot of companies that need to raise prices but they can't because they have competition? how much of this is pricing power? michael: i think netflix has zero pricing for content. the content owners have all of the pricing power. even if you are creating original content, you are with lou and amazon

and amc. everybody is buying originals. prizingdoes not dictate -- pricing. david: i'm talking about the pricing power against me. they must be deciding i'm not going to dump them. michael: with negative free cash flow, it is clear netflix is spending $12 in cash for every $10 it takes in. that is the math. if i'm going to give you $12 worth of stuff you are going to sign up all day. i don't think that they lose subscribers if they raise price. i think they slow growth if they raise price. if you are not a subscriber it is a harder decision at $11 than two. -- $10. my understanding, netflix has 50 million subscribers in the u.s.. what hundred 25 million households.

they have penetrated 40% of the market. it is natural growth is going to slow organically. we are talking to dollars a month. have the bills that we all , it doesn't even touch the sides. if you like the stuff you get, it is a small part of the household balance sheet it is hard to see people dumping it. alix: your thoughts? hard,the thing that is others know more about the company, but you know only have amazon but google and youtube and apple in terms of delivering video. you think about what the cost of capital is, or the business that is in video. they can be similar to what amazon has done in the supermarket industry. you can stick to your lower prices for longer which makes netflix tougher because that is

their core business and made a have those other pockets to go after. i think what it will get to, people think about all companies. revenue margins, leverage. what netflix and others have done, they get more leverage but you have to keep your revenues up and your margins. obviously simultaneously my revenue. it is a tricky dynamic when you have players willing to drop cost. >> is this an edge in a wedge? yearoday, maybe $12 next so they can start to harvest the margin? they have been buying circulation. >> absolutely. intellectuallys honest guy. he said at the last price increase they would probably go two years between them. this is the price increase for

2017. i don't think we get another until 2019. by 2025 they will be a $15. i don't think they make any money on a free cash flow basis until into the next decade. i think that they have to keep borrowing but you are right. as they have higher revenues they can fire -- borrow more. they are going to have to finance this content. alix: thank you for joining us. goldman -- golden girls was on hulu? that was my favorite. >> i know the show, i haven't seen in 20 years. >> just run. check out tv . you can watch us online.

interact with us directly. look for the moment lori found out golden girls was on hulu. this is bloomberg. ♪

david: u.s. payroll fell considerably weaker than the consensus estimate which called for an increase. wages are finally accelerating. september average, month over month at 2.9% year-over-year. table, us around the rick rieder. some are questioning the wage numbers. are they whether impaired? rick: there is no way we can glean any trends. payrolls were distorted. it looks like the unemployment move was also distorted. doubt, average hourly

earnings are boosted. if you look at the construction earnings and utility workers carded in from out of state they are basically camped out doing utility repairs. a dramatic deviation from trend. construction, .7 versus an average of .3. twice the rate. workers, .1 in the month. a huge contribution there which means anyone who is trying to say we have finally arrived at full employment is slicing the baloney 10. >> we caught up with the national economic course of counsel director earlier. this is what he had to say. >> when you lower the business tax rate on the corporate rate we make ourselves more competitive. we make it so businesses want to

locate in the united states. hire labor. they compete for labor. they hire people. do you say to that? >> certainly there is an incentive to center businesses in those regions but that wasn't evident in the jobs report. we don't even have the details of the tax plan let alone know whether it will be implemented. we are hearing they are skeptical about the wage numbers. revisedrevise they were out. there was no hurricane. any oneacting to payroll number is being overzealous. this is so screwed up because the nature of the hurricane. however, august was revised up. you look at underneath the surface earnings numbers, we do

think there is wage acceleration. is it you'll have seen prior, we don't know that much. only twice in 50 years have we seen unemployment levels like this before. we think it is accelerating. you shouldn't overreact to one number. alix: hurricane nate is coming. >> i think hurricane nate may be a category one storm. that impact will be far less than what we saw from harvey and irma which were more extreme. we talked before the report about the potential range of implications. gulf storms have a larger impact on economic data and implement data because there is so much more industrial activity. florida is a lot of tourism and real estate. less ripple effect. boss happy?

>> not weak enough but at least the right foot. great to see you. that does it for us on bloomberg daybreak. let's will through the market action. the longest winning streak since 2013, a record high close yesterday. yesterday weakness. 500. tens of 1% on s&p the story in the bond market, it begins to emerge in a bigger fashion. showing some strength. this is bloomberg. ♪

>> it is soon :00 in new york. it 10:00 in hong kong. i'm new york, i'm vonnie quinn. mark: welcome to bloomberg markets.

vonnie: a jobs report stoner. 2010.rst drop since the hurricanes take their tolls. average earnings are the highest level since the great recession. we break it down and have a look at the budget. president trump sounds a cryptic warning as he gathers at the white house. he says it might be the calm before the storm. we look into the context of his remarks. at the bottom of the hour and exclusive interview with kyle bass. what he says about bitcoin,